/regulation & compliance

News and resources on regulation, compliance, legal and governance issues for banks and fintechs.
UK Payments Association calls on new PSR chief to delay APP fraud rules

UK Payments Association calls on new PSR chief to delay APP fraud rules

The UK payments industry has called on the new interim Payment Systems Regulator (PSR) chief to postpone the implementation of new APP fraud rules by a year, warning that failure to do so could lead to "permanent damage" to the sector.

Last week, after a four-year stint, managing director Chris Hemsley stepped down from the PSR, replaced on an interim basis for nine months by David Geale.

Hemsley had been overseeing plans to improve protections for victims of APP (authorised push payments) fraud that will see the vast majority of money - up to £415,000 - lost to APP frauds reimbursed to victims.

With the new rules set to come into force in October 2024, the UK Payments Association has used the arrival of Geale to call for a 12 month postponement "to ensure the right policies, technology and systems are in place to avoid permanent damage to the UK’s payment industry and its ability to enable safe, instant, cheap and convenient payments".

A briefing paper put together by the industry group argues that a delay to the reimbursement rules will let the industry prepare as well as bring in Big Tech - which it has long said is the source of APP scams - into the process.

The briefing also reiterates the industry's stance that the threshold should be £30,000, not £415,000. With the average scam costing £11,000 for business and £1,500 for members of the public, a recommended mandatory reimbursement threshold of £30,000 is still more than double the average scam for businesses and 20x the average scam for consumers.

The Association last month wrote to the Economic Secretary to the Treasury, Bim Afolami, to protest the cap, calling it "simply not proportionate,"

Riccardo Tordera, head, policy and government relations, Payments Association, says: "If the current changes are implemented, we believe the prudential risk and requirements to participate in the UK payments market will increase significantly - resulting in reduced competition and an increase in the unbanked population.

"It will also result in an increase in cost and friction of real time payments and a decrease in investment into the UK Fintech market due to higher risks of failure and lower profitability."

Comments: (8)

Bill Trueman
Bill Trueman - Riskskill.com - London 11 June, 2024, 10:33Be the first to give this comment the thumbs up 0 likes

This is a rather a silly debate. It is a simple matter of WHO loses the money. If I as a customer of my bank ('Bank-Customer') instrut them to make a payment to a fraudster to thier bank ('Bank-Fraudster')  - which bank shoudl lose. Reserach by UK payments shows that Bank-Fraudster are a small number of smaller banks. Our experiences are that, driven by UKPayments, the main 'Bank-Customer' banks have included endless "are you sure this is genuine" messages, and 'Bank-Fraudster' have continued to open accounts and disperse money for fraudsters. How and why did they open these accounts for fraaudsters? Was the identitity taken sufficient.

It is about time that the losses were apportioned to the banks that were at fault: so that they can start doing their jobs properly. And the sooner the better.  And why are there limits at all? Why shoudl we 'let Bank-fraudster' off-the-hook' at all.

We'd go further:
- 100% of all losses ought to go to the bank that let the fraudsters succeed with the fraud.  

- The industry body should stop pandering to all the neo banks that want to avoid proper legal customer (fraudster) onboarding due diligence and do what is right for customers. There shodul be a price to pay for cutting corners.  

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 June, 2024, 13:38Be the first to give this comment the thumbs up 0 likes

Bingo! This totally resonates with my prediction that this populist PSR APP Scam Compensation regulation will get postponed, if not canceled, after UK elections. Change of PSR Chief is an unexpected windfall for banks.

Last I checked, alleged fraudsters - and even convicted criminals - can get bank accounts, so it makes no sense to hold the payee bank responsible for APP Scam.

Kudos to banks for pushing back against the rollout of this Drunk Under Lamp Post regulation.

Bill Trueman
Bill Trueman - Riskskill.com - London 11 June, 2024, 14:19Be the first to give this comment the thumbs up 0 likes

@ Ketharaman Swaminathan - this is not regulation driven - but through a voluntary code with PSR pressure and consumer / media led persuasion.

*** Fraudsters should not be able to get accounts *** - it is AML globally that requires the banks to undertake proper customer onboarding: and if the did, then there would / should be no APP fraud. Or money available to claw back. 
Who do you think shoudl be liable? Not the conned customers, nor the paying banks that have simply complied with customer instruction. The bad boys are the fraudsters, and then the banks that have accepted the payments and then taken instructions from a fraudster to further hide the money. A FIRST PRINCIPLE is to 'follow the money' and reverse as much of the process as one can. Exchange of Bills Law and the Cheques Act details these processes as 'Conversion' in law. These are not cheques of Bill, but the principles apply that the receiving entity must operate so as not to pay the money to the wrong person (i.e. a fraudster).  

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 June, 2024, 17:27Be the first to give this comment the thumbs up 0 likes

If this compensation policy is voluntary, then my conspiracy theory that banks will delay payments to earn float income seems correct. 

AML is mostly against terrorist funding. There's no AML / Sanctions Screening Check in domestic payments, which comprise bulk of APP Scam cases.

Zillions of builders take money and run away, do you think they don't get to open bank accounts, or that their bank reimburses defrauded customers? Obviously no.There is no law against opening bank accounts to anyone with KYC documents, particularly if they don't have a sticker on their head announcing that they're fraudsters. 

APP FRAUD is an oxymoron. Fraud means Unauthorized Payment. Law already exists to reimburse victims of fraud. APP stands for AUTHORIZED Push Payments, ergo it's authorized, can't be fraud, must be called by a different name e.g. APP Scam.

Most of your other questions are already answered in my blog posts Why Is It So Hard To Catch Cybercriminals?Fraud v Scam: Who Is Liable For CybercrimeWhy Don’t UPI / Zelle Provide Fraud Protection?Three Strike Rule To Eliminate Cybercrime.

I'm glad that some banks like Revolut have already started implementing some form of my Three Strike Rule. 

A Finextra member
A Finextra member 11 June, 2024, 18:431 like 1 like

@ Ketharaman Swaminathan - who do you propose should suffer the losses?

A Finextra member
A Finextra member 12 June, 2024, 10:43Be the first to give this comment the thumbs up 0 likes

Ahh.. it's a conspiracty theory. That makes sense. Stupid me to think that this is a legitimate case. Not sure thare are "Zillions" of builders in the world and certianly not in the UK, the country this releates to. 
Fraud also means "wrongful or criminal deception intended to result in financial or personal gain"  so once again, you show you lack of knowledge in this area.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 June, 2024, 12:03Be the first to give this comment the thumbs up 0 likes

@Anon 11 June, 18:43: 

Short Answer: Payor.

Long Answer: Cf. cited blog posts. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 June, 2024, 12:19Be the first to give this comment the thumbs up 0 likes

@Anon 12 June, 10:43:

It's a fraud by payee on payor, ergo payor can seek legal redress to nail the payee and get their money back. 

But it's not a fraud by bank on payor, so there's no case for bank to reimburse the payor. ICYMI, UK Supreme Court has ruled accordingly in Philipp v. Barclays lawsuit.  

Meanwhile, enjoy your knowledge in this area.

Trending